The Spirit Level - how does it measure up where it matters?

Christopher Snowdon

19 June 2013

Earlier this year, the Work Foundation published a study of inequality in Britain that threw up some uncomfortable findings for those who believe that income differentials are the root of all evil. The hypothesis put forward in The Spirit Level is that greater income equality fosters health and happiness while inequality is a direct cause of misery and unrest. ‘If you want to live the American dream,’ says Spirit Level co-author Richard Wilkinson, ‘you should move to Finland or Denmark’. But why travel so far? Inequality varies greatly within countries and so, since wealth disparities are most visible at the local level, moving to a more equal city should yield benefits.

The Work Foundation shows us exactly where these pockets of egalitarianism are. The most equal city in Britain turns out to be Sunderland, followed by such places as Bradford, Peterborough and Burnley. The least equal city is London, followed by the likes of Reading, Guildford and Milton Keynes. For the most part, inequality is concentrated in the wealthy south east of England and, as the study notes, ‘cities with high median wages almost always tend to have high inequality.’ The more equal cities, on the other hand, ‘tend not to be very affluent’. This trade-off between wealth and equality will come as no surprise to economists, but it is reassuring to know that the wealth in the less equal places trickles down. As the study notes, ‘more affluent cities are more unequal, but affluence - on average - leads to wage gains for those with low skill levels’. Furthermore, whilst unemployment is higher in more equal cities, people with low skills find it easier to find work in less equal cities. In short, inequality is associated with people across the income spectrum being better off, while equality is associated with people being equally poor.

The economic fundamentals suggest that the less equal cities are better places to live, but if the Spirit Level hypothesis is correct, people should be fleeing London and Aylesbury to move to Barnsley and Stoke. With a Gini coefficient of 0.24, Sunderland is a more equal place than Denmark. Perhaps people who want to live the American dream should really be moving to Wearside. I mean no disrespect to these fine cities when I point out that migration in Britain mostly works in the opposite direction. People tend to move from the rest of the country to the unequal south east.

Are they making a mistake? Will they be less happy? The relative income hypothesis suggests that they would happier being poor in a poor area than living on a somewhat better income amongst the rich, but a study published in Science last year suggests that migrants really do know what is best for them. In the mid-1990s, the US government gave thousands of people living on welfare the opportunity to move from poor neighbourhoods to more affluent areas. Their names were picked by lottery, thereby creating a randomised experiment. The Science study measured the subjective well-being of those who moved and those who stayed after a period of 10 to 15 years. Those who moved were significantly happier. Other studies of the same people have found that those who moved were also significantly healthier, had better mental health and were less likely to be obese.

It is important to note that those who moved did not become wealthier than those who stayed. Still living in social housing, they went from having an income that was average by the standards of their community to having an income that was low in absolute and relative terms. They found themselves at the sharp end of inequality and yet they were healthier and happier than those they left behind.

Only a certain sort of social scientist could find it remotely surprising that people prefer living in a nice neighbourhood. It is true that people compare their living standards with those of their friends and neighbours, but there is little evidence that such comparisons dictate their well-being. People who leave the ‘more equal’ towns and cities of Britain to seek a better life are unlikely to regret it.

This is an interesting take on inequality. However wages are not the only factor in terms of quality of life - in more unequal cities, housing, transport, childcare and food costs are likely to be higher - reducing quality of life, regardless of slightly higher wages.
What also chimes is that, with the US experiment, a benefit would likely to have arisen from the migrants move from mono tenure, down trodden and perhaps ghetto-ised areas. Of course this is going to benefit those who leave - but inequality is what would have created the ghettos in the first place!

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